Tax amendment makes it easier to transfer Canadian farmland to family

Oct 19, 2021

An amendment to Canada’s Income Tax Act – Bill C-208 – recently took effect offering relief to better provide intergenerational transfer of shares of family farms, small businesses and fishing corporations—a wordy way of saying that its now easier to transfer ownership shares to children and siblings.

Granted Royal Assent on June 29, 2021, the Canadian Department of Finance quickly announced it wanted to delay the amendment until January 1, 2022, but a few weeks later on July 19, 2021 instead stated that there was no issue, and that the amendment is now law.

One of the amendments was to Section 84.1 of the Income Tax Act which had made it difficult for children to use a corporation to buy shares of a small business, family farm, or fishing corporation from their parents—a taxing issue when parents wanted to claim the lifetime capital gains exemption on a sale of those shares.

While parents who wanted to sell shares to an unrelated corporation could use the capital gains exemption to reduce the income tax on the resulting capital gain on the transaction, the same did not hold true if sold to their children. If family farmland or business was sold to their children, parents would get an income tax hit – and not the good type.

Basically, it was easier to sell to a third-party than it was to leave the family farmland and business to a family member. That is no longer the case.
Sales to children are no longer negatively affected by the amended Act, with parents receiving the same tax rights as if sold to an outside party.

Section 55 of the Income Tax Act was also amended. Previously, tax relief was provided for certain corporate reorganizations that assist in the transition of business or family farm or fishing assets between family members, but it was not allowed in a sale to siblings—apparently they weren’t considered to be family.

Coming to its senses, the amendment now allows for siblings to be considered a family relation relative to this tax rule.

Thanks to C-208, the amendments to Canada’s Income Tax Act will aid in the continuation of a family farm enterprise.

Photo by Luemen Rutkowski on Unsplash

Video: Will the 2025 USDA December Crop Report Be a Market Mover/Surprise?

Historically, the USDA December crop report is a non-event or another dud report as the USDA reserves any final supply changes to the final report in January of the following year in this case 2026. But after the longest U.S. government shutdown in history at 43 days and no October crop report will they provide more data/surprise and make an exception?
Our China U.S. soybean purchase tracker is now at 26.6% or a total of 3.2 mmt but for traders it’s taking too long to unfold.
The final Stats Canada production report was bearish canola and wheat projection a record crop in both (it adds to the global glut of supplies) and bullish local corn and soybean prices in Ontario/Quebec thanks to a drought. It will not help the fund flow short-term, the USDA may need to offset it?
A U.S. Fed interest rate cut of another 25-basis point next Wednesday (probability 87.1%) could help fund flow and sentiment in stock and ag commodities into year end.
More inflows into Bitcoin this past week saw prices rebound back above 90,000 with support at 82,000 and resistance at 96,000.
A V-shaped bottom in cattle suggest the lows are in after Mexico reported another new world screwworm case. Lower weights, seasonal demand and higher U.S. beef select/choice values with a continued closure of the Mexican border to cattle will result in a resumption of higher cattle futures into yearend.
Australia is expected to produce its 3rd largest wheat crop ever at 36 mmt adding to the global glut of supplies.
Reports of ASF in hogs in Spain the largest pork exporter in Europe could see the U.S. win more pork export business long-term.
If the rains verify into next week of 3-5 inches for Brazil it would go a long way to fixing the dry regions from the last 2-months, but the European weather model has been wrong for the past 2-months!
Natural gas futures are surging to the 3rd price count as frigid hold temps set in.
CDN $ is also surging to end the week on a very resilient economy and better employment numbers suggesting no interest rate cuts next week.
Finally, the CFTC report showed funds were net buyers of soybeans but sellers of corn, canola and wheat. In real time the funds have gone back to selling as they take some profits.